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June 13, 2017

Apartments and Immigration: A Deeper Dive

Immigration has become an increasingly prevalent and often polarizing topic within policy discussions, and its effect on the apartment industry cannot be understated. Immigrants are a vital component of the apartment industry--both as workers involved in the development and operation of communities and as residents who call apartments home.

While previous discussions have focused on immigrants as they relate to the workforce, this edition of Research Notes will dive into immigrants as apartment residents. Apartments provide homes to millions of immigrants; in fact, an immigrant heads one in four apartment households.

But the term immigrant is broad, and we aim to examine some of the finer details of where foreign-born apartment householders were born, their socioeconomic characteristics, and how long they tend to live in apartments.

Big Piece of the Market

In 2015, more than 4.7 million of the nation’s 18.7 million apartment householders were born outside of the United States. This compares with 3.4 million U.S.-born baby boom householders (born 1946-1964) living in apartments and 5.4 million U.S.-born millennial (1981-1997) apartment householders.

The considerable influence exerted by immigrants on apartment demand stems not only from their numbers, however, but also from their greater propensity to rent. On average, immigrants are 40 percent more likely to rent than native-born Americans. And unsurprisingly, immigrants who arrived the U.S. most recently tend to have the highest rentership rates.

The lower rentership rates observed for earlier arrivals to the U.S. can be explained partly by age. Those who came to the U.S. prior to 1986 were at least 30 years old in 2015, which makes them more likely to have purchased a home. But still, even among immigrants of the same generation, those who arrived earlier tended to rent at lower rates, as shown in Figure 2.

Regions of Origin

Yet, to lump all immigrants together would be to ignore the existence of many distinct groups of arrivals, each with its own unique cultural characteristics and behaviors. There may be no reason to expect an immigrant from Mexico, for instance, to share the same housing preferences as one from China or India. And while all immigrant groups do share a general preference for renting compared to native-born citizens, some groups tend to rent longer than others.

To conduct a more nuanced analysis of the effect of immigrants on apartment demand, we classified foreign-born residents by the following regions.

Immigration Leaders

Residents hailing from the Middle Americas region constituted by far the largest share (43 percent) of foreign-born residents in 2015, bolstered primarily by Mexican immigrants, who made up over 60 percent of the Middle Americas group and over a quarter of the nation’s total immigrant population.

This makes Mexico the most common country of origin for America’s foreign-born population, and no other country even comes close. In 2015, for instance, Indian-born residents were the second most populous foreign-born demographic in the U.S., and their numbers only amounted to approximately one-fifth of those who were born in Mexico.

But immigration from Mexico decelerated drastically following the 2008 recession. Of the Mexican-born residents living in the U.S. in 2015, just over 1.8 million arrived within the last ten years (2006-2015), while more than twice this amount (over 4.1 million) arrived within the previous ten years (1996-2005). Furthermore, an estimated 1.6 million Mexican-born residents either moved out of the United States or died between 2006 and 2015, yielding a net inflow to the U.S. of only
slightly greater than 200,000 during the decade.

However, even with this diminished Mexican immigration rate, from 2006 to 2015, the U.S. absorbed a net 1.9 million immigrants from the Middle Americas region, nearly one-third (29.2 percent) of America’s total net immigration during the period.

Following closely was the foreign-born population from Southern Asia, which grew 57.2 percent during the same period to more than 1.3 million. The only immigrant group to grow at a higher rate than the Southern Asians was the Middle Eastern/North African cohort; while a small group—it only makes up approximately 3.4 percent of the total foreign-born population in the U.S.—it’s growth rate topped 60.1 percent from 2006 to 2015.

Variable Rentership Rates

This regional and cultural information is important because, along with how long someone has been living in the U.S., it heavily influences an immigrant’s rentership rate.

Recent arrivals (2006-2015) from Middle Americas, Sub-Saharan Africa, the Middle East and Southern Asia all posted rentership rates above 80 percent, more than double the rate of all American households. On the other end of the spectrum, recent immigrant householders from Canada rented at a rate of only 48.0 percent, which despite being a lower rate than for those particular groups is still higher than the overall U.S. rate.

As one might expect, the longer the foreign-born live in the U.S. the less they rent. So, immigrants who have been in the country for at least 10 years are likely to have lower rentership rates than those who arrived more recently, and those who have lived in the U.S. more than 20 years are likely to have even lower rentership rates and so on.

However, this progression differs noticeably by immigrant group. U.S. residents who were born in the Middle Americas, South America and Sub-Saharan Africa, for example, exhibited only a slightly lower propensity to rent throughout their second decade in the country. Even householders from these regions who arrived in the U.S. prior to 1996 rent at higher rates than the total U.S. population.

Southern Asian immigrants are at the other end of the spectrum: The rentership rate of recent arrivals is more than twice the rate of those who came a decade earlier. This sharp drop in rentership could be reflective of one or more factors. It may be that immigrants from Southern Asia initially rent at very high rates but then shift preferences to homeownership after hitting the ten-year mark. Alternatively, the most recent group of Southern Asian immigrants may be different from earlier
Southern Asian groups in that they have an innate higher propensity to rent.

It should be noted once again that, although the above chart shows rentership rates below the national average for some groups of earlier arrivals (Oceania, Southeast Asia, East Asia, Europe, Canada and Southern Asia), this is primarily a compositional effect of age.

Take the case of Southern Asian immigrants as an example. Those who arrived from the region prior to 1996 exhibited a rentership rate of 22.3 percent, significantly lower than the 34.9 percent shown for all U.S. households. However, if we look only at householders aged 55 or older, these rentership rates become 25.2 percent (Southern Asia arrivals prior to 1996) and 21.3 percent (all U.S. households), respectively. The takeaway – even after decades of living in the U.S., immigrants
still maintain higher rentership rates than the native-born population.

Of course, not all immigrants who rent live in apartments. Many foreign-born renters live in single-family homes or small, two-to-four unit rental buildings. Fewer than half (44.5 percent) of all rental households from the Middle Americas region lived in apartment buildings with five or more units, the lowest rate of all immigrant groups, followed by rental households from East Asia (48.4 percent lived in traditional apartments. The Southern Asia cohort again stood at the other extreme, with
more than 71 percent of renter households living in apartments.

Income Levels and Affordability

Income also plays an important role in determining immigrant apartment demand, and in this area as well, there are notable differences between distinct immigrant populations.

Among recent arrivals to the U.S. (2006-2015), those with origins in Southern Asia possessed the highest median household income at $70,900. But higher income levels do not always translate to higher rents. In fact, recent immigrant apartment households from Europe, Oceania, Canada, East Asia and South America all recorded higher median gross rents. As a result, the median monthly rent to income ratio for Southern Asian apartment households (21.1 percent) was lower than that of every other
immigrant group. To that end, just 31.0 percent of recent Southern Asian apartment households spent more than 30 percent of their household income on rent, a much smaller share than the 51.9 percent figure for all U.S. apartment households. Recent immigrants from the Middle East/North Africa reported the highest level of rent burdens, with more than two-thirds (67.3 percent) spending more than 30 percent of household income on gross rent.

Among the largest immigrant cohort (Middle Americas), the median household income for recently arrived apartment households was $28,800—less than that of all other immigrant groups except for the Middle East/North Africa group. This group also had a similarly high rent-burden level with 60.7 percent of households spending more than 30 percent of income on rent in 2015. Immigrants from the Middle Americas appear to compensate for their lower incomes by living in larger households; recent
arrivals from the region averaged 2.96 persons per apartment household, more than every other group.

Conclusion

As strong as the fundamentals have been for the apartment industry in the past, a closer look at the data reveals that apartment demand might have been even stronger if not for the substantial slowdown in net immigration from the Middle Americas region following the Great Recession. Even so, immigration from other regions proved more resilient to economic fluctuations.

With their high rentership rates, recent arrivals from abroad remained a key component in the growth of apartment households. Moreover, our analysis also shows the varying nature of apartment demand by immigrant group, with not only time in the U.S. but also region of origin and income influencing their rentership rates. These trends are important to note as apartment firms continue to serve a diverse renter population.

This edition of Research Notes was researched and written by Chris Bruen, senior research analyst for NMHC. He can be reached at cbruen@nmhc.org.

About Research Notes

Published quarterly, Research Notes offers exclusive, in-depth analysis from NMHC's research team on topics of special interest to apartment industry professionals, from the demographics behind apartment demand to effect of changing economic conditions on the multifamily industry.

Questions

Questions or comments on Research Notes should be directed to Mark Obrinsky, NMHC's Senior Vice President of Research and Chief Economist, at mobrinsky@nmhc.org or 202/974-2329.

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